By what mechanism? Where does it go and how is it isolated from the driveline that created it?

Downward pressure from the rider flexes the frame rather than providing radial force to the crank arm to make the crank rotate. Frame flexes back when the now tangential force from the rider lessens and does not provide any rotation to the crank arm.

Downward pressure from the rider flexes the frame rather than providing radial force to the crank arm to make the crank rotate. Frame flexes back when the now tangential force from the rider lessens and does not provide any rotation to the crank arm.

If the frame flexes back after 6 o'clock, that means the pedal is being raised. If the pedal is being raised while it is already traveling upward, how is that not helping the rider pedal?

The upward and lateral movement of the BB (including the entire crankset as well as the pedal) does not result in crank rotation.

The pedal is on the end of the crank and it is rotating upwards between 6 and 12 o'clock. So if the end of the pedal is lifting as it swings up from the BB, and your foot is at 7 o'clock when that happens, it is most certainly helping move your foot in the direction of pedaling.